Dollar hits one-week high as renewed U.S.-Iran tensions lift oil prices

SINGAPORE: The U.S. dollar held near a one-week high against major currencies in early Asian trading on Wednesday after renewed U.S. strikes on Iran revived geopolitical concerns and pushed oil prices higher.

The dollar index, which tracks the greenback against six major currencies, traded at 101.18, its strongest level since July 2.

Demand for safe-haven assets increased after the United States launched a fresh wave of strikes against Iran on Tuesday and revoked a licence that had allowed the country to sell oil. The move followed attacks on three tankers in the Strait of Hormuz.

Westpac analysts said concerns over the stability of the peace deal had resurfaced after Iran attacked ships passing through the Strait of Hormuz. They said renewed inflation concerns had also pushed global bond yields higher.

Oil prices extended gains for a second day, with Brent crude rising 2.6% to $76.12 per barrel at the start of Asian trading. Higher oil prices raised concerns that energy costs could add to inflationary pressures.

In currency markets, the U.S. dollar strengthened 0.1% against the Japanese yen to 162.28. Bank of Japan board member Toichiro Asada, who dissented against the central bank’s June rate increase, told Reuters on Monday that he would need to see signs of demand-driven inflation before supporting further hikes.

The euro slipped 0.1% to $1.1405, while the British pound fell 0.1% to $1.3353. The Australian dollar was steady at $0.6926.

The New Zealand dollar gained 0.1% to $0.5681 ahead of the Reserve Bank of New Zealand’s rate decision due at 0200 GMT. Markets narrowly expect the central bank to raise interest rates for the first time in more than three years.

Cryptocurrencies also edged lower. Bitcoin fell 0.2% to $63,518.35, while ether declined 0.5% to $1,774.45.